AMP Limited (ASX: AMP) shareholders will be focusing on the market today after the diversified financial business reported its financial results for the half year ended 30 June 2018.
AMP offers a variety of services including banking, insurance, superannuation, advice and other services.
Here are some of the highlights from AMP’s report:
- Revenue fell by 6% to $7.17 billion
- Profit dropped 74% to $115 million
- Underlying profit declined by 7.1% to $495 million
- Dividends per share decreased by 31%to 10 cents
According to Bell Potter, analysts were expecting a profit of $485.4 million, so it appears to have beaten market expectations.
You may notice that there is a big difference between the profit and underlying profit. AMP said around $312 million of costs relates to advice remediation and related costs because of inappropriate or dodgy advice. The business was under scrutiny in the Royal Commission, which AMP said has cost $13 million so far.
Fallout from the advice scandal & Royal Commission
Advice scandals have already claimed the job of AMP’s former CEO as well as the Chairperson. AMP has actioned a number of steps to fix the situation, including hiring the respected David Murray as its new Chairperson and also reducing some superannuation fees.
AMP’s acting CEO, Mike Wilkins, said: “The events around the Royal Commission into financial services have challenged our reputation, and while we continue to monitor the impacts, we have taken action to stabilise the business and move forward.”
However, it may not be as easy to move forward as Mr Wilkins would like as it’s believed five different shareholder class actions have been lodged. The claims are yet to be quantified, but AMP said it will vigorously defend these actions.
Silver linings
AMP pointed out that it wasn’t all bad news in this report. AMP Bank earnings were up 20% compared to the profit it generated in the first half of last year.
AMP Capital also managed to increase operating earnings by 2% compared to last year. As part of a focus on infrastructure, AMP acquired a 49% stake of London Luton Airport on behalf of investors in the Global Infrastructure Equity series. This adds to AMP’s other airport investments, such as the 27.32% stake of Melbourne Airport.
“Our first half results have demonstrated AMP’s resilience through a difficult period,” Wilkins said. “While there will be further challenges ahead, we have a strong foundation on which to reset the business and restore the confidence of our customers and the wider community.
Outlook
The second half of AMP’s financial year will continue to have headwinds, according to Mr Wilkins. However, by focusing on customers and putting their interests first he thinks AMP can earn back trust from AMP clients and the Australian public.
He will also be hoping to win back investor sentiment, with the AMP share price down almost 40% compared to a year ago.
Introducing The Australian Investors Podcast
Join The Rask Group’s founder, Owen Raszkiewicz, as he profiles Australia’s best investors, founders, authors and financial thinkers. Download it free on iTunes, Castbox, SoundCloud or wherever you choose to listen.
